Taxpayers and customers suffer in banks’ equal-opportunity rip-off

ALLIED Irish Banks was exposed this week as having ripped off at least €14m since 1996 by systematically overcharging foreign exchange customers.

What was particularly disturbing about this disclosure was that it has been known for over two years, but the bank did not bother to put their hands up until somebody tipped off the Irish Financial Services Regulatory Authority a couple of weeks ago.

This is being blamed on the software system being used by the bank. Funny thing with computers while they can do the most amazing things, they can only act as programmed. So who told the computer to rip off the customers? And who did not tell the customers when they found out about the rip-off?

The software system being used by AIB to calculate foreign exchange charges is called Castlemain. Jack Duggan, who terrorised the outback in Australia, was born and reared in this country "in a place called Castlemaine".

Duggan, who was celebrated in song as the Wild Colonial Boy, supposedly "robbed the rich to help the poor", but he got shot in the end.

AIB has cost the exchequer and the general public millions and has been getting away with it for years.

In the late 1980s and early 1990s AIB robbed taxpayers of millions, not only by facilitating but also by actually encouraging tax evasion. Under Deposit Interest Retention Tax (DIRT), which was first introduced in 1986, the banks were responsible for deducting tax from the interest being paid to account holders resident in this country, but AIB encouraged depositors to set up bogus non-resident accounts.

AIB had a total of 86,660 non-resident accounts, of which 53,000 were bogus, because they were held by people living in this country. Thus more than three out of every five non-resident accounts were bogus.

Other banks also facilitated the evasion of DIRT, but none on the scale of AIB. One AIB official recalled that in his first posting he opened an account for a farmer one day who deposited over £50,000. The clerk was delighted with himself and went to tell the bank manager, only to be bawled out for not giving the farmer a foreign address.

Another AIB clerk recalled being approached by a bank inspector who asked about a particular account with an address which went something like 5 Main Street, Manhattan, New York City.

"What's wrong with that?" the inspector asked, showing the clerk the bank record. The clerk replied that the address did not look very American but added that he would not know if there was a 5 Main Street in Manhattan or not.

"What about the man's occupation?" the inspector asked.

"Dairy farmer," was the reply.

The banks treated the tax evasion as a joke and the Government has been treating the role of the bankers as little more than a joke ever since.

Over £80m extra should have been withheld and paid to the State, but the bank shirked its responsibility, and was initially only asked to pay £14m. Is it just a coincidence that the latest rip-off comes to at least €14m, or could this be categorised as some kind of offset?

Some will remember when AIB endangered the country's whole banking system. In 1985 Garret FitzGerald's government took unprecedented measures to come to the rescue of AIB when it was faced with collapse over the handling of its wholly owned subsidiary, the Insurance Corporation of Ireland (ICI). It had suffered massive losses by taking on crazy risks, and the Government had to come to its rescue to save AIB from possible collapse, both to save the AIB jobs and to prevent repercussions that could have undermined our whole banking system.

"The taxpayer was eventually protected from carrying any part of the burden," Garret noted in his memoirs, "Unhappily we never succeeded in convincing public opinion of this."

With the help of Fianna Fáil the myth was generated and has persisted ever since that the Government actually bailed AIB out of the ICI fiasco with taxpayer's money, whereas, in fact, AIB and the other banks had to absorb the whole cost. But AIB contemptuously paid a full dividend to its shareholders at the end of the year. Ultimately it was the other banks which were screwed.

BEVERLY FLYNN was moaning during the week that she was only doing her job when, as an employee of National Irish Bank, she helped people to evade their taxes.

"I followed the instructions of the bank," she declared in a radio interview this week. "I never understood that I was doing anything wrong."

She was a big girl when she was working in the bank and she must have known what she was doing when she assisted people to evade their taxes. She impressed nobody with her protestations of wounded innocence. The High Court jury didn't believe her, neither did the Supreme Court, the Taoiseach, nor her Fianna Fáil colleagues.

Poor Beverly thought she was being victimised. She complained that nobody in Fianna Fáil supported her during her court battles, unlike the way Sinn Féin supported the Colombia Three.

Did she really think she was going to impress anybody by comparing herself to them? That was some class act!

She was not victimised. None of the employees of any of the banks was prosecuted for assisting people in evading tax, and that included her. She ran into her problems because she tried to sue RTÉ for libel. In the process she waged an unwarranted attack on the freedom of the press.

She put RTÉ to enormous expense to protect that freedom, and she has incurred a bill of well over €2m. Can she pay that bill, or will those paying the licence fee ultimately be saddled with financing her behaviour?

She protested that he was just exercising her constitutional right to protect her good name, but she was only deluding herself, because in the opinion of the highest court in the land she had "no reputation deserving of legal protection".

She was a victim of her own arrogance, and in the process she has exposed that arrogance which prompted some within Fianna Fáil to behave as if they were above the law. She may well be right that people in the party would have behaved differently 20 or 30 years ago. That probably explains why we have had so many tribunals investigating the shenanigans of those years.

For too long Fianna Fáil has been plagued by the weeds that it nurtured in glorifying the culture of the rogue with nod-and-wink politics. It allowed itself to become the party of winkers.

Fianna Fáil won five by-elections in a row in the late 1960s, turning a minority government into a majority one. After one of those victories, Donal Hickey noted in his book, The Mighty Healy-Rea, Minister for Justice Brian Lenihan told Jackie Healy-Rea "to tell every publican" to stay open in celebration. One garda was warned by Jackie that there was a remote part of Kerry where gardaí who had been "foolish enough to cross powerful politicians" were sent.

Poor Beverly found out this week that times have changed.